Category: Mortgage (Page 55 of 63)

Realities Facing Homeowners and Renters

December 26, 2016 / Tom Bonetto

Regardless of whether they rent or buy, folks will be paying more to do so, according to second quarter data released by the Census Bureau, which also shows the homeownership rate in the U.S. is at the lowest level in more than 50 years.

The percent of households that are owner-occupied, known as the homeownership rate, was 62.9 percent in the second quarter, the lowest since 1965. The rate is 0.5 percentage points lower than the second quarter of last year and 0.6 percentage points lower than the rate in the first quarter of 2016.

“Tight housing inventory from a lack of new construction continues to create affordability challenges, particularly at the lower end of the market,” Doug Duncan, Fannie Mae’s chief economist, notes in an economic outlook note.

Less for More

A chart from the Census Bureau shows how rental asking prices have continued to rise through the last two recessions. Meanwhile, home sale asking prices, which have been rising this year, are recovering from the major drop during the last recession.

The median asking rent for vacant units was $847 in the second quarter, according to the Census Bureau. The median asking sales price for vacant sale units was $164,500.

Median asking rent for vacant “for rent” units shown with gray bars that indicate when the economy was officially in a recession. (Source: U.S. Census Bureau, Current Population Survey/Housing Vacancy Survey)

More Households Forming

But overall household formation has been relatively steady, thanks to renters who are going out on their own, the Wall Street Journal points out. Renter-occupied housing units surged by 967,000 in the second quarter to 43.9 million units from 42.9 million units in the second quarter of last year.

Meanwhile, owner-occupied units fell by 22,000 units to 74.4 million units in the second quarter compared to the same period last year.

Homeownership rates were highest for older households. Occupants aged 65 and older had a homeownership rate of 77.9 percent. The rate was lowest for those under 35 years at 34.1 percent.

Older Millennials Looking to Buy

Whatever is holding back renters from buying, whether it’s fewer starter homes or incomes, preferences may change in the future, leading these renters to become buyers.

Between 2010 and 2012, homeownership rate gains stabilized for young adults through their late twenties and early thirties, and between 2012 and 2014 homeownership rate gains were larger than the increments for previous generations passing through the same age range during the housing bust, according to Fannie Mae’s Economic and Strategic Research Group.

Find out more from Fannie Mae’s Home Story here

The views expressed are my own and do not necessarily reflect those of American Financial Network, Inc

Why the Sudden Increase in Interest Rates?

December 6, 2016 / Tom Bonetto

I’ve been receiving a good number of questions from both buyers and agents regarding the movement in interest rates. Many have been asking why the relatively big increase over such a short time frame and what does the future hold?

I’ll try to give a brief synopsis and link to a few articles for those who want to take a deeper dive.

Inflation Fears

In essence, worries about higher inflation have been a main factor fueling the big bond market selloffs (which brings mortgage rates up) over the past month. The process accelerated after the U.S. election in early November. The reason: investors have bet that the prospect of expansive fiscal and economy policy from the new U.S. administration would lead to stronger growth and higher inflation.

Secondly, the Federal Reserve has strongly hinted that it will raise interest rates next week. Economic growth remains slow and steady, and inflation measures are relatively non-existent – but Fed officials are increasingly convinced that things are now good enough.

Their concerns about moving too soon are giving way to worries about waiting too long, and the possible inflationary pressures that come along with it.

The Fed would rather err on the side of caution rather then risk inflation.

Many argue that the more-than-likely rate increase is actually priced into the current market – and it was the election that brought it into focus sooner rather than later.

Here’s a look at the 10-year treasury yield (a very good directional marker to interest rates) over the last 6 months:

Notice that yields are nearly a full point higher that the summer lows.

Does that mean you missed the boat if you didn’t act in October? Hardly.

I wouldn’t be surprised to see rates continue to tick upward over the next 30 days, but I believe things will begin to normalize in 2017. As mentioned earlier, upward inflationary measures are not really there.

More importantly, when you look at mortgage rates right now versus historical averages, we are still WAY below the norms. This is really a great time to buy and borrow.

Here’s a funny story that can give some perspective on the current situation. When I married by beautiful bride nearly 25 years ago, I got an absolutely smoking deal on a loan for our condo. It really was unheard of at the time. The rate….9.5%. That’s right, anything under 10% back then was considered a steal.

For more:

Min Zeng from the Wall St. Journal does a fine job of analyzing the situation here

Binyamin Appelbaum and Kevin Granville of the New York Times talk about the upcoming interest rate increase here

The views expressed are my own and do not necessarily reflect those of American Financial Network, Inc

5 Ways to Raise Your Credit Score Today

December 2, 2016 / Tom Bonetto

I receive questions all the time regarding the credit scoring system, the FICO score, and how to improve those scores.

Not only can improving your FICO credit score improve your chances of obtaining a mortgage, but it could improve your auto insurance premiums and, possibly, make you a more attractive employment candidate.

FICO scores range from 300 to 850 – and mortgage applicants get the best mortgage rates and terms when their FICO scores are 720 or higher.

For borrowers of all FICO scores, the best way to improve your credit rating is to understand the factors that make up your FICO score, and to take the right actions that can make a positive impact on your score.

Find out more here from The Mortgage Reports and Britt Scearce

What’s Included In Your FICO Score

The FICO credit score takes into account a combination of all of the information found in your credit report.

Your FICO score is made up of the following:

Payment History: 35% of your overall FICO
Total Amounts Owed: 30% of your overall FICO
Length of Credit History: 15% of your overall FICO
New Credit: 10% of your overall FICO
Type of Credit in Use: 10% of your overall FICO

To find out what is impacting your FICO score you will want to review your credit reports. You can obtain a free copy of your credit report from each of the three main credit reporting agencies — Equifax, TransUnion, and Experian — at www.annualcreditreport.com.

Your scores are generated based on a snapshot of the information on your credit report as of the particular moment that the report is pulled. Correcting errors is crucial, therefore, to ensure the highest possible FICO score.

Here are things you can do in the short term to improve your score:

1. Verify your accounts are current

“Payment History” makes the largest impact on your FICO score at 35% of your overall score. It is vital, therefore, that you keep current on all of the accounts reporting to your credit report.

When reviewing your credit report, should you find any accounts that are past due, catch them up as soon as possible and pay at least the minimum payment required by the due date.

2. Dispute your inaccuracies

Should you detect any errors on your credit report, you will want to request a correction as quickly as possible. In order to make a correction, use the information on your report to contact the credit bureaus, and also the creditors which provided the erroneous data to the bureaus. Getting even one late payment removed from your credit report can improve your FICO score dramatically.

3. Ask for a little grace

Sometimes, a creditor may be willing to “help you out”. In cases where you make a relatively small slip-up, with a creditor you’ve never been late with, you can sometimes get a late-payment waived. It’s always a good idea to make a phone call and to ask for a little grace. This works best if you catch the delinquency early and bring the account current right away.

There are many examples of creditors removing a late payment from your credit report if there’s a legitimate story behind what happened, and if you can explain what steps you’ve taken to avoid a repeat occurrence.

4. Settle up collections, charge-offs, judgments and liens

Old collection items, credit card charge-offs, and judgments and liens can hurt your FICO score, too. If you’ve got any of these on your credit report, it’s time to contact your creditors and collection agencies and to settle up one-at-a-time.

In many cases, you can negotiate with your creditors to remove a trade line completely in exchange for settling an account for its full balance. You need to call your credits first, however, to find out.

5. Improve your debt utilization ratio

Another way to improve your FICO is to improve your “amounts owed”, or debt utilization ratio. Debt utilization makes up 30% of your FICO credit score. This is a measure of how much you money you owe to creditors as compared to how much credit is available to you. The FICO scoring model takes into account the utilization of each individual credit account; and the utilization of all of your credit accounts combined.

For example, if you have five credit cards, each with a $2,000 limit, you have a total $10,000 available credit over all five accounts. If you carry a $1,000 balance on one of the five accounts, you would have a 50% utilization on one card and a 10% utilization over all of your credit.

In general, debt utilization of 30% of less is good for FICO scores. Utilization over 30% is often bad.

Now that you are armed with this – get to work and see what you can accomplish to improve that score. Give me a call, as I’d be more than happy to coach you through this process, as well!

The Top Benefits of Home Ownership

November 28, 2016 / Tom Bonetto

There are obvious reasons to buy a house. Interestingly, there are a number of fantastic secondary benefits of owning a home that most renters are not yet aware of.

Not least, of course, is that you have somewhere to live. But there are a number of other upsides that are considerably less apparent, and they aren’t all about money. Here’s a great piece from Peter Morgan at The Mortgage Reports that outlines a few of them….

Buying A House Is Generally A Fantastic Investment

The U.S. Census Bureau has a table of historical home values on its website that starts in 1940 and ends in 2000. It uses constant year-2000 dollars for all figures to account for inflation.

Home Ownership Gets Easier Over Time

Paying your mortgage over time means you’re building equity each month. An asset you can sell or borrow against in the future.

Although, when buying a house for the first time, there can be a little financial strain. You have to come up with a down payment and cope with unexpected homeownership costs. You may feel the pinch for a few years.

But gradually things get easier, trust me on that!

Build to Your Tastes, Not Your Landlord’s

Do you want a bunch of pets? Does taste in decor matter to you? Do you like walls painted in crazy shades of pink, or do you spend your weekends tearing apart engines or woodworking in your shop?

No problem. When you own your own place, there’s no landlord to tell you those aren’t allowed.

Improve Your Credit Score

Buying a house can improve your credit score, especially if you don’t have a long credit history or many installment accounts. That’s because your mortgage –provided it’s managed well — helps drive up your credit score by showing you are a responsible borrower when you make your payments on-time and consistently.

Wealth Accumulation via Forced Savings

You can view the equity you build in your home as you make payments every month as a type of saving. Unlike renters, you’ve no choice but to increase your net worth. The Harvard University Joint Center for Housing Studies confirms this. In fact, on of their studies showed that homeowners acquire 46 times as much net wealth as renters.

For every $1,000 accumulated by non-homeowners, those who own a home acquire $46,000.

Benefits for Your Family

The National Association of Realtors (NAR) website links to studies and reports that make some pretty extraordinary claims for the benefits of homeownership, including:

Better mental and physical health
Improved community engagement
Higher educational attainments for the children of homeowners

Of course, you have to choose to involve yourself in your neighborhood, and to support your children’s efforts.

Contact your Realtor or Mortgage Lender for more!

The views expressed are my own and do not necessarily reflect those of American Financial Network, Inc.

Mortgage Approval After One Year of Self-Employment?

November 21, 2016 / Tom Bonetto

Self-employed mortgage applicants must prove stability of employment and income, usually going back two years. This is a bit tougher than it is for regular salaried employees.

Traditionally, mortgage lenders have required two years federal income tax returns in securing a mortgage for purchasing or refinancing real estate. There’s been changes to the way mortgage lenders underwrite mortgage loans.

Fortunately, there is a way to use just one year of tax returns to qualify for a mortgage. This can help newer business owners, as well as those who experienced a down year in the past.

Whether you are looking to buy a home or refinance one, you may be able to qualify by showing only your most recent year of income. Check out this article by The Mortgage Report’s Adam Lesner for more.

Getting Approved As A Self-Employed Applicant

Generally, a self-employed borrower is any individual who has 25% or greater ownership interest in a business.

According to conventional mortgage guidelines published by Fannie Mae, underwriters consider the following factors to approve a self-employed borrower.

The stability of the borrower’s income
The location and nature of the borrower’s business
The demand for the product or service
The financial strength of the business
The future outlook of the business

Two points stand out here when getting approved as a business owner: stability and consistency.

The way underwriters measure stability is by looking at length of history in that business specifically, and in that field.

They typically want to see a two-year history in the respective industry. This is where you may be granted an exception if you haven’t been self-employed the whole two years in that line of work.

Ask The Lender To Use Different Approval Software

In some cases, the underwriter won’t ask you to provide a full two years’ worth of tax returns.

Most applicants’ files are run through computerized underwriting systems, then verified by real person. The underwriting software, in some cases, will ask for the most recent year of tax returns only.

The one-year requirement typically comes from “Loan Prospector,” which is Freddie Mac’s loan approval software. Fannie Mae’s version of the software is less likely to give you a one-year requirement. Most lenders can approve loans via Freddie Mac or Fannie Mae.

If you have been self-employed less than two years, ask your lender to try running your scenario through Loan Prospector. There’s a chance this system will require you to document less self-employment than would another system.

If you receive the reduced, one-year requirement, it’s important to understand that your tax return must reflect a full year of self-employment income.

For example, if you became self-employed in April 2017, that year’s tax returns are not going to reflect a full year. If you started your business in November 2016, then your 2017 tax returns will demonstrate a full year of experience running your business.

Give your me a call to find out more – as there are multiple alternatives that we can examine!